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American Capital Agency Corp. Message Board

  • jdg8002 jdg8002 Apr 4, 2013 6:45 PM Flag

    OT - ETP offering

    12 mil units
    down almost $2 after hours

    I used to trade ETP's dividend (distribution for you hard core MLP types) cycles, but I can't recall ever trading one of the offerings. Anyone trading this?

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    • jdg,

      I just took a cursory look at the last two ETP SPOs. Here's what I see:

      - The last SPO was announced on 6/27/12.
      - The unit price at market close that day (before the SPO announcement) was 45.98.
      - The SPO was priced at 44.57.
      - Unit price upon market open the next day was 43.33 (a 2.65 gap down from the previous day's close).
      - Unit price drifted as low as 42.65, and closed that day at 43.60. Volume was 16.4 million units.
      - Unit price did not reclaim the 45.98 pre-SPO level for over a month (on 7/30), after the next dist. declaration.
      - That 45.98 level was essentially the high (actually touched 46) reached before the following ex-date (8/2).

      If the current SPO/distribution cycle (next ex-date should be around 5/2) generates a similar move, tomorrow may present a sub-48 entry point for establishing a long unit and/or option position that could be played for a potential move back to 50 over the next four weeks. The quarterly distribution has been a very consistent .894 (rounded) for about five years.

      - The previous SPO was announced on 11/7/11 (5 days after ex-date).
      - Unit price had closed that day at 45.97.
      - The SPO was priced at 44.67
      - Unit price at market open the next day was 44.08 (a 1.89 gap down from the previous close).
      - Unit price bottomed at 43.75 that day, but note that it moved down almost another dollar the following day.
      - So, "SPO+2" presented the lowest entry point for a subsequent long play.
      - The 45.97 pre-SPO unit price level was not reclaimed again for over a month (on 12/13).
      - Unit price actually topped 50 before the next ex-date.

      So, using this relatively small sample of the past two SPOs as a roadmap, I will be looking for an open tomorrow somewhere around 48, ideally drifting downward toward 47 at some point during the trading day. I will be watching the action in the May 47, 48, and 49-strike calls, and barring something unexpected I'll get into some combination of those options before market close.


      • 2 Replies to reit_freak
      • Great research, reit_freak! I dug around a little last night, except I didn't get as detailed, and came to a similar conclusion. I also decided the expected job data was a risk after the ADP numbers earlier this week, so I was holding out for a slightly larger discount at open.

        I'm keeping an eye on it but haven't opened any positions yet. If I do, they probably won't be large and might target farther dated calls. I was thinking Sept 45's or 47.50's but the value just isn't there for me yet, so I might end up with May contracts if I buy.

        Best of Luck to all longs!

      • Quick correction: will be looking primarily at the 47.50 calls today (there are no 48's, 49's).

        Quick update: as of 0900 (eastern) this morning, pre-market unit price is bouncing around in the the 48 mark (currently 47.96).

        Have an excellent day, folks!


    • I owned ETP numerous times last year. The current price is so high $2 discount would not get me in. I would consider $40 to $43 as fair but things could have changed since I last owner. They do give a 5% discount on Distribution reinvestment. But they are based on the high price near ExDay. Please consider BBEP and EEP. I now only own KMP.

      • 3 Replies to mr.phil2u
      • ETP had never raised the Distribution but they have a vary good one. One problem i had was the chain of gas stations they own,i trade from a IRA and i was concerned about EBTI problems, But the K1 showed minus EBTI so no problem there. But i prefer to own midstream pipelines and not gas stations.

      • I've traded KMP for years and may add more if we get a good pull back. Normally I also trade ETP, EPD, and LINE with a few others sprinkled in occasionally.

        I'm focused on the shorter term and use options, so the dividend run is really all I need. Valuation plays a role, obviously, otherwise I would be much heavier into the market right now (I've been light for about a month now). I'm very light on all MLP positions because of their price range. We'll see how this offering plays out. I will take another look at EEP & BBEP to see if they suit my style.

        Thanks for the input.

      • I was kind of thinking the same thing when I looked at the chart today Mr. Phul2u.
        It's had a good run up so it still looks a bit on the high side to me.
        But who knows.. maybe it will stay up there if the market remains strong.

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